Thursday 24 May 2012

A footnote

A switch from passive to active voice would have had me as a footnote to the tobacco excise increase RIS:
On the narrow  fiscal  grounds of covering the costs smokers impose on government, further increases in tobacco excise may  not be justified.  At over $1.3 billion per year, tobacco excise revenues may already exceed the direct health system costs of smoking10.  When the broader fiscal impacts of smoking are considered (eg shorter life expectancy reducing  smokers’ superannuation and aged care costs), smokers are probably already “paying their way” in narrowly fiscal terms.

10. A recent Ministry of Health study estimated health costs of smoking at up to $1.9 billion per year (15% of the Vote Health).  While this estimate used more detailed data analysis than previously available to estimate health costs, it is well above previous estimates (a  2007 estimate put the cost of smoking to the health system at $300-$350 million per year) and its methodology for comparing lifetime health care costs has been contested. [emphasis added]
I still contest that measure as it relies on an assumption that smokers otherwise would never impose end-of-life costs on health budget. I also have an OIA in for more of the background workings on the $1.9b estimate.


  1. Nice to see some recognition of these facts from Treasury; nonetheless, I'm not sure how relevant the issue of net life-cycle health costs is. As shown by the Government Response to the Report of the Māori Affairs Committee on Tobacco (which doesn't even mention externalities), excise tax increases are now openly based on a paternalistic rationale and aimed at deterring smoking rather than at internalising externalised costs to the health system. Tobacco use has been stigmatised to a point where policymakers and special interests do not feel the need to justify themselves on a liberal basis with a Pigovian argument.

    1. The public case for the anti-tobacco is still the costs on others. Turia keeps citing the $1.9b figure; getting harder to find folks at MoH who actually think that number is worth anything.

      Treasury and others coming out and saying that smoking doesn't impose extra burden on the crown pushes the debate back to whether paternalism is warranted.